BOOM FOR WHOM?

BOOM FOR WHOM?

Professor Sheila Kennedy in her blog recently decries a system where those barely above the poverty line and who are working are unable to get ahead because of poor minimum wage levels, noting that millions of such underpaid workers are one medical emergency away from bankruptcy. My view:

Sheila is right to call out the powers that be with their propaganda to the effect that all is rosy, the economy is booming, employment is up, wages are up, and everyone is happy. What they don’t tell us is that the grossly misnamed (as in “right to work”) “tax cuts and jobs” legislation sponsored by Trump and Ryan has brought on price inflation, higher interest rates etc. which have long since swallowed up the chump change increase Trump and Ryan so magnanimously handed out to us proles recently while obligating us to trillions more in long term debt and interest and while reducing taxes on the superrich to pay for such largesse – largesse, that is, to the superrich.

Also lost in business press and Wall Street translation were the millions and millions of citizens in poverty (to our shame the highest percentage in the Western World) and those “tweeners” to which Sheila refers, those who work but who are relegated to virtually slave wages and who are one appendectomy away from Chapter 7 bankruptcy per Senator Warren, perhaps the world’s most brilliant bankruptcy professor (and parenthetically, my current choice for President), who tells us the numbers show that medical emergencies are the biggest cause of bankruptcy.

When, as Sheila has, you add the poverty stricken to the tweeners, you have a country that is booming for some and an adventure in poverty for millions of others, which does not fit my definition of “booming.” The problem at bottom is wage inequality. Simply put, the financial class is taking far too much of the wealth and income of the economy out of the pot and leaving too little to other participants in the economy, especially the labor sector.

The Dow is in the stratosphere and the financiers are rolling in retained “earnings” (including a gift of something less than 2 trillion dollars (but at increasing interest) given to them by the Trump-Ryan bill while cutting their taxes, an unearned gift which we were told would be spent on increasing their workers’ wages, building new plant, buying new equipment etc. This huge giveaway of your money and mine went instead (as we knew it would) into stock buybacks, capital gains etc. out of money given (and not earned) to them. Its toxic effects (including a new look at ratings by Moody’s) will, I have predicted, bring us to recession later this year or next year at the latest, especially with Trump’s short-sighted tariff games which will increasingly roil international markets and perhaps speed the day of reckoning.

We have not had an increase in the already then inadequate federal minimum wage since 2009. It stands, apparently forever, at $7.25 an hour, though I note that our politicians have adjusted our codes and rules many times over while tinkering with Dodd-Frank (to the banks’ delight) and lowering taxes on the superrich during such period, culminating in the Trump-Ryan atrocity, a hit our economy may not be able to withstand in even the medium term. Considering that the median wage in 2009 (as adjusted for inflation) had not been raised for some 20 years before then, any substantial increase in minimum wages would have still amounted to slave wages, which is where we stand today and which is the prime reason aggregate demand is not booming even though Wall Street is.

My position is that we have a booming economy when wages and the Dow rise in tandem (as they did following WW II up to Reagan following the infamous memo of Lewis Powell in 1971 and Reagan’s later adoption of trickledown economics on the back of a napkin supplied by Friedman of the right wing Chicago School of Economics fame. I think wage inequality (aside from Trump’s inanities) is our number one domestic issue and that we should play catch-up with a federal minimum wage of $15 an hour. Can’t afford it? Wrong. Our people and our economy cannot afford not to afford it. Corporate workers have done their share for the last some 40 years; it’s time the financiers ponied up their share which, it may surprise such moneychangers to know, that adoption of such Keynesian policies (as we did after WW II) will cause a boom in aggregate demand which will put more profits in their bottom lines in a win-win situation. There is an old saying that “if you want to make money, you have to spend money.” Henry Ford was castigated by his fellow industrialists for his outrageous grant of a five dollar day to his workers who were building his Model Ts at the beginning of the 20th century. He was called a communist, a socialist and other vile names by his industrial peers. He answered that he wanted to pay higher wages so that his workers could buy his cars. Result? His workers enjoyed higher wages for that time and day, bought his Model Ts, and he became a billionaire. Lesson learned? GERALD E